The CFP Board is the Quintessential Wolf in Sheep's Clothing
By John H. Robinson
I have long been an outspoken critic of the CFP Board. Over the past two decades, I have published many articles exposing how the CFP Board has consistently put its own political and financial interests ahead of the interests of consumers. (See below)
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In 2019, I helped develop the Wall Street Journal’s front-page exposé showing how the CFP Board had not only turned a blind eye to thousands of its CFP members who had misconduct events on their SEC and FINRA regulatory histories but was harming consumers by spending millions of dollars on public awareness campaigns telling them that they should “always trust a CFP.” For the record, despite the CFP Board’s prodigious public relations efforts to recast its image as a tough enforcer and consumer advocate, most of the more than 6,000 CFPs with blemished regulatory histories cited in the WSJ article are still flying under the radar today, and still show up as clean on the CFP Board’s Verification website. (Hundreds of examples are available upon request). Meanwhile, the Board continues to spend more than $10 million per year on advertisements trumpeting the same “trust a CFP fiduciary” mantra.
DOL Proposal Finally Extends the Fiduciary Standard to Insurance and Annuity Sales
With that background as an introduction, it may seem odd that I am in complete agreement with the CFP Board in supporting the Department of Labor’s proposal to apply a fiduciary standard of care to ALL retirement investment advice. What is particularly novel and important about the DOL proposal is that while FINRA and the SEC have regulations in place that require brokerage reps and investment advisers (including financial planners) to place the interests of their clients above their own, the National Association of Insurance Commissioners (NAIC), which serves as the regulatory authority for the insurance industry, has consistently resisted adopting consumer-first best practices such as disclosures of conflicts of interest and sales commissions.
In the DOL’s press release, the agency expressly singled out fixed index annuities as an example of a complex insurance product with opaque fees and commissions that lends itself to conflicted advice from sales agents interested in coaxing consumers’ rollover money out of their employer retirement accounts and IRAs. In a surprise to absolutely no one, in the days and weeks following the DOL’s proposal release for public comments, the email inboxes of financial advisors filled with letters from insurance companies expressing outrage over the DOL’s “over-reaching” regulation and encouraging them to write their congressmen and support industry lobbyists efforts to make the DOL’s proposal “DOA.”
As a financial planner, I am registered with the SEC and held to a strict fiduciary standard under the Investment Advisers Act of 1940 that, among other duties, requires me to disclose all material facts that may be relevant to the client’s decision-making process and to fully disclose all potential conflicts of interest. The problem has always been that the SEC’s regulatory reach extends only guidance pertaining to investment in securities, and does not extend to fixed insurance products. The DOL’s proposal attempts to solve part of that problem, and for that reason, I wholeheartedly support the measure.
For its part, the CFP Board would like Congress and the American public to believe that it shares the same principles I do and that it is all about placing the interests of consumers first. To show its support for the proposal, it sent 2022 CFP Board Chairman Kamila Elliott, CFP to read a prepared statement to Congress in January 2024. Ms. Elliott’s five-minute presentation may seen and heard in its entirety on the CFP Board’s YouTube Channel.
Similarly, in late February, the CFP Board lobbied U.S. Congresswoman Jamana Hayes (D-Connecticut) to present a scripted presentation demonstrating how consumers may be misled by non-CFPs who are not held to a fiduciary standard while CFPs must provide advice as fiduciaries. Here is the presentation the CFP Board promoted on LinkedIn and X (formerly Twitter): PLAY VIDEO
The CFP Board’s Sleight of Hand – Its Own Self-Defined Faux Fiduciary Standard
As I stated in my LinkedIn repost of the CFP Board’s self-congratulatory messaging, I embraced the CFP Board’s support for the DOL proposal right up to the point where the Board began to deceive and mislead Congress and the American public.
The CFP Board would like the world to believe that it exists to protect consumers and that its members are held to a strict fiduciary standard. A closer examination reveals a very different reality. For starters, the CFP Board has its roots in the insurance industry and has long encouraged insurance agents to obtain the CFP designation to enhance their sales credibility. Today, there are tens of thousands of insurance agents who are permitted to use the CFP mark but are not required by the CFP Board to disclose sales commissions they earn from annuity or insurance product sales or to provide written disclosure of potential conflicts of interest in recommending one insurance product over another or in recommending insurance products over investments in bank instruments or securities.
The question that begs asking is, “How does the CFP Board allow thousands of CFP-touting insurance agents to sell products such as index annuities to their customers in this manner while conforming to a fiduciary Standard?”
The answer is the CFP Board’s Code of Ethics and Standards of Conduct were carefully word-smithed, to resemble the SEC’s codified fiduciary standard of care while leaving gaping loopholes that allow its members to operate free from the requirements most consumers would reasonably expect from a true fiduciary standard.
To illustrate the differences, the SEC’s fiduciary standard requires investment advisers and financial planners to, “…provide full and fair disclosure of all material facts to your clients and prospective clients. Generally, facts are “material” if a reasonable investor would consider them to be important.” The SEC also requires advance written disclosure of fees and conflicts of interest. In contrast, the CFP Board’s dramatically watered-down standards of conduct require only disclosure of “material conflicts of interest,” and does not require any written disclosure of such conflicts. To be clear, the SEC’s advanced written “disclosure of all material facts” is a vastly higher standard of duty than the CFP Board’s orally conveyed “material conflicts of interest.”
The Wolf In Sheep’s Clothing – What’s In it for the CFP Board?
Even though the CFP Board enjoys a symbiotic relationship with the insurance industry, the Board has a long, established history of placing its interests and ambitions above those of all other parties. If the DOL proposal becomes law, it seems likely that more insurance agents would be compelled to earn the CFP designation so that they may present themselves as being held to a fiduciary standard. More broadly and more importantly from the CFP Board’s perspective, CFP Board CEO Kevin Keller has made no secret that a primary goal of the organization is to make the CFP mark a required designation for all financial planners. This would make the CFP Board the de facto regulator of all financial advisors and would give monopoly powers to the CFP Board. By repeatedly being called to testify before congress on behalf of consumer interests, the Board is angling toward that penultimate objective.
Throughout its 50+-year history the CFP Board has consistently put its interest ahead of consumers and has caused immeasurable harm by failing to protect consumers from bad apples within its ranks, by promoting the CFP mark as a sign of trust to consumers, and by misleading congress and the American public about its faux fiduciary standard of care.
I urge all readers of this piece to raise awareness of the CFP Board’s misleading and deceptive conduct to your congressmen and state securities commissioners and I encourage you to share this post on social media.
RELATED READING
DOL Retirement Security Proposed Rule Fact Sheet
CFP Board Advocates on Capitol Hill for DOL’s Proposed Retirement Security Rule.
